Few sectors of the economy are more vulnerable to market ups and downs than the construction industry. After experiencing a slew of local and regional economic challenges throughout the years, construction company owners are no strangers to uncertainty. As a result, many commercial builders believe it’s time for a new way of doing things and has taken it upon themselves to create a new future in the commercial construction industry.
While a number of companies have implemented an Employee Stock Ownership Plan (ESOP) to boost productivity, profitability, and growth, the construction industry has used ESOPs less frequently in comparison to other sectors. However, with many construction companies implementing ESOP into their company structure, the new approach has made way for a new generation of leaders to take rise in the commercial construction industry.
So, what is an ESOP construction company, and why are so many commercial builders considering the new approach? In this article, we’ll discuss what an ESOP construction company is, how they work, why many construction companies are restructuring their organization to align with ESOPs and some of the benefits of working with an ESOP construction company.
Continue reading below to learn more about ESOP construction companies and find out why MegaKC is the team to trust if you’re looking for superior commercial construction services in Kansas City.
What Is An ESOP and How Does It Work?
According to the National Center for Employee Ownership (NCEO), construction companies and contractors accounted for 15% of ESOP companies in the United States as of 2019, the most recent year for which data is available. With many construction companies moving toward becoming ESOPs, many commercial builders have begun to consider whether it’s right for their business.
An ESOP is a tax-qualified retirement plan that can be used in conjunction with other qualified programs and in which the plan’s funds are primarily invested in the stock of the business that sponsors the plan. Essentially, an ESOP is intended to provide retirement income to plan participants but also serves the dual purpose of transitioning ownership of the business to employees who are prepared to take on executive responsibilities.
When an ESOP is established, the company’s current owners sell all or a portion of their stock to the plan and give stock ownership of the company to employees with the anticipation that the stock will increase in value over time.
Every year, the company makes annual contributions to fund the purchase of ESOP shares and ensure that the ESOP plan is adequately funded to purchase the shares of departing employee shareholders when they retire or otherwise leave the company. Over time, as more shares are distributed to employees, the ESOP repurchases the stock from departing employees, allowing the departing shareholders to benefit from the stock’s tax-deferred gains while it grows within the plan.
While it usually takes several years for an employee to gain full ownership of their shares, an ESOP can encourage employees to stay with the company and become active participants in the company’s growth. The longer an employee works for the business, the greater their participation in the ESOP. As a result, an ESOP is most effective for companies that have potential employees who may step into executive roles in the future and provides a beneficial way for a business owner to reward loyal employees while simultaneously transferring ownership of the company.
3 Benefits of Working with ESOP Construction Companies
There are many benefits that come with working for an ESOP construction company. But did you know there are also several significant advantages to working with an ESOP construction company?
Here are some of the ways customers benefit from working with an ESOP construction company:
1. Employees Are Invested In Their Work
An ESOP is intended to provide employees with the incentive to be active participants in the company’s capital growth. As a result, all employees’ interests are aligned with the company’s goals, and they remain motivated to complete each project with the utmost professionalism, resulting in customer assurance that their project will be adequately staffed and managed.
2. Long-Term Continuity
Many construction companies have insufficient plans for business continuity following the departure or retirement of major stakeholders. By working with an ESOP construction company, customers can feel confident in knowing that the core values of the construction company they work with remain intact, regardless of who is leading the company.
3. High-Quality Craftsmanship and Professionalism
Every employee in an ESOP company understands that they are responsible for a portion of the construction company’s success. If the company meets its deadlines and projections, the stock’s value should rise year over year, benefiting those with the longest tenure the most. Years of tenure with the company not only provide employees with in-depth knowledge of their craft, but they also understand how to complete each project more efficiently, how to solve problems effectively, and the importance of customer satisfaction.
Contact MegaKC Today to Learn More About Our Commercial Construction Services
ESOP construction companies offer numerous benefits for construction business owners and commercial partners. While it’s not enough for construction company owners to simply choose to become an ESOP, it’s crucial that commercial builders understand how to maximize the benefit of an ESOP structure to ensure the success of the company, its employees, and its clients.
At MegaKC, we’re committed to providing superior consulting and commercial construction services to our Kansas City customers.
As a 100% employee-owned Kansas City construction company, our staff takes immense pride in their work and works tirelessly to produce high-quality results. We’re proud to have worked on a wide range of commercial construction projects, and we remain dedicated to providing our customers with solutions that reflect our commitment to precision and professional craftsmanship.
If you’re looking for a contractor or a commercial builder in Kansas City you can count on to work with you every step of the way, contact MegaKC today.